BTS Asset Management has created a dynamic and potentially more productive alternative to traditional "buy and hold" portfolio management.

Traditional portfolio management based on Modern Portfolio Theory (MPT), attempts to use historical data to build an "optimized" portfolio according to "risk vs. reward" ratios. The assumption is that the markets, based on past results, will continue to value assets efficiently, and that performance projections will be fulfilled by optimizing portfolios according to risk and return, then giving them enough time. However, based on BTS' 26-year history of successful risk-management, it has been demonstrated that markets are, indeed, inefficient. Various market segments and sectors do not perform consistently.

Inspiration for the BTS Strategic Asset Allocation Program (SAA) comes from Harry Markowitz's work in the 1950s. Markowitz received the 1990 Nobel Prize in Economics for his work on Mean Variance Optimization (MVO) and financial economics. MVO, a cornerstone of Modern Portfolio Theory, is a productive solution to portfolio selection, only if the past is a perfect picture of the future. MVO assumes that markets are efficient and there is no room for tactical asset allocation. The SAA tactical approach may improve performance and reduce volatility beyond what can be expected with MVO. The reason for this is that if any two different 5-year or 10-year periods of any asset category are examined, the same level of return or risk is not produced. BTS believes that MVO should only serve as a first step in SAA portfolio construction, not the last. This differentiates BTS from so many other firms utilizing MVO in their portfolio construction today.

In effect, BTS picks up where Modern Portfolio Theory leaves off. BTS builds on MPT by factoring in short-term market trends and influences that can potentially have big impacts on asset values and returns. While no one can predict with certainty where the market is headed, BTS uses in-house technical analysis models that seek to identify sustainable short-term trends (6-12 months) in concert with MPT and economic forecasting to manage portfolio assets. The goal is to concentrate assets in the sectors and funds that are providing the best returns and reduce exposure to those that are not ... in an attempt to improve performance and mitigate risk. The portfolios are rebalanced and reallocated quarterly, positioning assets for the next 90 days.

3 Styles of SAA to Choose From:

1. Alpha Portfolios - In this portfolio option, BTS selects the
   mutual funds from those available within each portfolio
   platform or variable annuity. The advantage of this option is that BTS has access to a wide array of top performing fund families and tracks the funds selected closely, making changes when necessary.
2. American Funds Portfolios - This portfolio option uses American Funds exclusively. BTS selects the American Funds used in the portfolios and tracks their progress closely. American Funds offer a wide range of fund options and is one of the largest mutual fund companies in the U.S
3. Direct SAA Portfolios - The Direct Portfolios are set up so that you and your advisor select the mutual funds for your portfolio which are held directly at a mutual fund or variable annuity. BTS will re-balance and reallocate the portfolio's asset weighting based on its ongoing SAA research methodology. This investment approach allows you and your advisor to review and monitor individual fund performance and make any fund-level changes (if necessary)
   

•Strategic Asset Allocation Brochure

•Program Performance Snapshot

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